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Factors Affecting an Employer’s Annual Payment

Number of Employees who are MembersGenerally, the more members there are on an employer’s payroll, the higher the employer’s annual payment will be. Membership in the Retirement System is falling — from the fiscal year ended March 31, 2005 to the fiscal year ended March 31, 2014, the total number of active members decreased from 541,244 to 524,427.

Higher SalariesHigher salaries often increase an employer’s total bill. Since employer rates are billed as a percentage of salary, the more your employees earn each pay period, the more your contribution to the System increases.

Retirement Plans and Options OfferedEmployers can choose to offer improved retirement plans or optional benefits (i.e. one-year final average salary for police officers and/or firefighters) to its employees. The greater the benefits offered, the greater the employer’s annual contribution. For example, if an employer chooses to provide a special plan for a specific employee group such as police officers or firefighters, the cost will be greater than a regular plan. A special plan allows for retirement after completing a specific number of years of credited service in specific job titles rather than attaining a certain age.

Higher salaries often increase an employer’s total bill. Since employer contributions are billed as a percentage of salary, the more your employees earn, the greater your contribution to the System will be. Overall, this graph shows that, from 2005 through 2014, total salaries have risen from $22.8 billion to $27.6 billion. However, when you compare each system, the results are a bit surprising: while ERS salaries rose from $20.2 billion in FYE 2005 to $25 billion in FYE 2010, salaries are slightly down in each of the last four fiscal years. Conversely, PFRS salaries have continued to trend upward, from $2.5 billion in FYE 2005 to $3.2 billion in FYE 2014.

This graph shows that, from 2005 through 2014, benefit payments have increased by 91%. The primary reason for the increase in public pension benefit payments over the last decade is an increasing number of retirees, with new retirees consistently outnumbering pensioner terminations and generally having higher final average salaries than existing retirees.